The 3.2% return this week takes ALK-Abelló's (CPH:ALK B) shareholders five-year gains to 131%

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. One great example is ALK-Abelló A/S (CPH:ALK B) which saw its share price drive 131% higher over five years. It's also good to see the share price up 16% over the last quarter. But this could be related to the strong market, which is up 11% in the last three months.

The past week has proven to be lucrative for ALK-Abelló investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for ALK-Abelló

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last half decade, ALK-Abelló became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the ALK-Abelló share price has gained 2.4% in three years. Meanwhile, EPS is up 168% per year. This EPS growth is higher than the 0.8% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. Of course, with a P/E ratio of 57.35, the market remains optimistic.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that ALK-Abelló has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at ALK-Abelló's financial health with this free report on its balance sheet.

A Different Perspective

ALK-Abelló shareholders gained a total return of 12% during the year. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 18% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - ALK-Abelló has 1 warning sign we think you should be aware of.

Of course ALK-Abelló may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Danish exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.